A Measuring Stick for “Affordable” in ACA Replacement Proposals
Current GOP proposals claiming to replace the Affordable Care Act speak more about access to insurance than they do affordability, but they give lip service to both. On the access side, they say that they want to keep the “pre-existing conditions” portion of the ACA.
However, without cost limits for families, guarantees of coverage regardless of preexisting conditions could be as empty as pre-ACA law. Under the HIPAA law that existed at that time, everyone had to have access to a “guaranteed issue” policy. However, that policy could be very expensive and have severe limitations. For example, the Blue Cross guaranteed issue policy in Tennessee covered only generic medications, and it required a “go-bare” period of several months before it could be issued.
Affordability under the ACA comes down to the following for middle-class Americans not on Medicaid:
1. A family’s insurance premium cannot exceed 9.65% of their income (AGI), if their income is below 400% of the Federal Poverty Level (FPL). That is an income of over $90,000 for a family of four. That is for a “silver level” policy, which is meant to be a 70%/30% type of policy.
2. No lifetime maximums
That is the bottom line.
Age rating is limited to 3:1, meaning that an older person cannot be charged more than 3 times that of a younger person simply because of age. Medical underwriting is not allowed. Charging women more than men is not allowed. However, the two things that put an absolute cap on insurance premiums are the two items above.
One big problem, referred to as “the cliff”, exists for people who make just over the 400% FPL. Make $1 more and you get no subsidy at all, meaning that your insurance premium could take a much larger chunk out of your income. Also, this created a perverse incentive for people to limit their income in order to get the subsidy.
However, there is no reason to have a cliff at all. Simply defining the standard policy as a silver plan, and stating that the premium cannot exceed 9.65% of a family’s income, is sufficient to create a progressive limiting of who gets subsidies without the need for a cutoff point. Subsidies would gradually become smaller as incomes increased.
The most recent proposal from the GOP suggests that a tax credit would be given to anyone who is not covered by employee coverage or a government plan. Such a credit could implement the 9.65% limitation very easily, but that is not the proposal. Instead, some unnamed amount would be given to every family needing coverage, with the amount being driven only by some unknown formula tied to age. There would be no consideration of income or geographically-determined cost of insurance.
Giving the same tax credit to a family with an income of a million dollars that is given to a family making $40,000 is yet another slap in the face to the middle class; unnecessarily raising costs and further widening the income/wealth gap in the U.S.
This most fundamental core of the ACA got very little publicity, even under President Obama, presumably because constituents’ eyes glaze over when numbers are mentioned. If that is the case, the GOP contention that people can shop for the best policy in a wide-open sea of options is particularly cynical. Even now, in the ongoing dialog about changes to the ACA, on both sides of the aisle, this most fundamental aspect is missing in action.
There are many parts to the ACA, and activists often have their favorite; coverage for birth control, keeping kids on policies until age 26, preventive care coverage, and so forth. All of these are important as well, but not at the expense of ignoring the core component of the ACA — affordability.
